Hardware/Software
Design Services
Benefits of Design Outsourcing
Outsourcing is a familiar concept to many
entrepreneurs. Small companies routinely outsource their
payroll processing, accounting, distribution and many other
important functions -- often because they have no other choice.
Many large companies turn to outsourcing to cut costs. In
response, entire industries have evolved to serve companies' outsourcing
needs.
But not many businesses thoroughly understand
the benefits of outsourcing. It's true that outsourcing can
save money, but that's not the only (or even the most
important) reason to do it. Wise outsourcing can provide
a number of long-term benefits:
Control capital costs. Cost-cutting may
not be the only reason to outsource, but it's certainly
a major factor. Outsourcing converts fixed costs into variable
costs, releases capital for investment elsewhere in your
business, and allows you to avoid large expenditures in the
early stages of your business. Outsourcing can also make
your firm more attractive to investors, since you're able
to pump more capital directly into revenue-producing activities.
Increase efficiency. Companies that do everything themselves
have much higher research, development, marketing and distribution
expenses, all of which must be passed on to customers. An
outside provider's cost structure and economy of scale
can give your firm an important competitive advantage.
Reduce labor costs. Hiring and training staff for short-term
or peripheral projects can be very expensive, and temporary
employees don't always live up to your expectations.
Outsourcing lets you focus your human resources where you
need them most.
Start new projects quickly. A good outsourcing firm has
the resources to start a project right away. Handling the
same project in house might involve taking weeks or months
to hire the right people, train them and provide the support
they need. And if a project requires major capital investments
(such as building a series of distribution centers), the
startup process can be even more difficult.
Focus on your core business. Every business has limited
resources, and every manager has limited time and attention.
Outsourcing can help your business to shift its focus from
peripheral activities toward work that serves the customer,
and it can help managers set their priorities more clearly.
Reduce risk. Every business investment carries a certain
amount of risk. Markets, competition, government regulations,
financial conditions and technologies all change very quickly.
Outsourcing providers assume and manage this risk for you,
and they generally are much better at deciding how to avoid
risk in their areas of expertise.
Time-to-Market
Time is perhaps the most important factor in the make vs.
buy decision since time-to-market is the ultimate measure
of success. While an in-house component could take months
or years to develop, most suppliers need only a modest
amount of time to customize their products and meet the
customers' requirements. Overall, this means a quicker
turnaround from prototype through production, increasing
productivity and shorter time-to-market. With standards-based
technology and experienced support, the benefits continue
through subsequent product generations.
Cost
Another strong argument for outsourcing is cost. Hardware
manufacturers invest a significant amount of time and
money to develop, implement, test, and support their
products. If an OEM were to expend similar resources
to specify, design, implement, test and maintain each
hardware component, the price of the final application
could be too expensive for its intended market.
In particularly difficult disciplines, such as DSP-board
development, make vs. buy generally proves more costly and
potentially riskier for advanced DSP implementations requiring
high throughput or intensive computations. Many companies
therefore no longer design the DSP function in their applications
but instead rely on DSP experts for specification, implementation,
and customization. Non-proprietary technologies also provide
end users with a greater variety of options from a wide array
of suppliers. And third-party support from software and hardware
vendors enables designers to easily integrate multiple outsourced
components into their applications. Hardware manufacturers
also devote a significant portion of budget to ongoing research
and development. Expertise in their core products, together
with a sense of the direction in which a particular technology
is likely to evolve, put alert manufacturers on the leading
edge.
Because technology changes daily, keeping products state
of the art can mean maintaining an in-house support group
or redirecting key engineers away from their primary responsibilities
so they can redesign in-house hardware - a potentially costly,
defocusing, and time-consuming venture. Furthermore, if the
individual(s) responsible for all the programming and integration
leave unexpectedly, training new technical people on in-house
designs consumes additional productivity, time, and money.
On the other hand, manufacturers are fully prepared, experienced,
and motivated to provide upgrades, enhancements, and on-going
support to their clients.
Hardware Cost Reductions
XStream has significant experience
with hardware product cost reduction projects. Our design
teams will find at least 25% board cost reduction, or we
will not take the project. Our strategy is to find more cost
effective parts, cheaper DSPs, FPGAs, CPLDs, better packaging
on the board to reduce layers thereby saving money. We know
that in todays fast paced environment, designers have to
stay focused on developing the next generation products and
seldom have time to cost reduce an existing product. Cost
reductions are not exciting for the designers, all of the
fun has already been had. Cost reductions are seen as boring
and not interesting. However, for the business manager, or
owners of the company cost reductions are very exciting because
the savings flow directly to the bottom line. Here is an
example that shows the importance of cost reducing a product.
A company has a hardware product that costs $500 and they
market this product for $1000. The current gross margin is
50%. XStream will find at least a 25% cost reduction,
or a minimum of $125 dollars in reduced cost. After our team
does the cost reduction the product now costs $375 and the
gross margin is 62.5%! The extra $125 dollars flows directly
to the bottom line on every card sale. Cost reductions are
always put on the back burner by the designers. Designers
prefer to develop new cards, not re-design old ones. XStream
will quickly turn around a cost reduction and deliver
you improved margins on your existing business.
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